The Inheritance and Trustees’ Powers Bill received Royal Assent on 14 May and is due to come into force on 1 October of this year. The Act makes important amendments to the Intestacy Rules which are relevant in respect of the distribution of assets when a person dies without leaving a valid will or dies with a valid will that does not deal with their entire estate. The current Intestacy Rules have been in place, largely un-amended, since 1925 and the overhaul is long overdue.
The key changes include the following:
- Under the current Intestacy Rules, where a person dies leaving a surviving spouse but no children, their living parents (if any) will benefit from their estate. If neither children nor parents survive, any living siblings, or if they predecease leaving children, the deceased’s nephews or nieces, will take a share of the deceased’s estate. However, under the new Rules, where an individual dies without leaving any children or grandchildren, their surviving spouse will inherit the deceased’s entire estate outright. Any living parents/siblings/nephews and nieces will not benefit in this scenario.
- Under the new Rules, where children or other descendents are left by the deceased, the surviving spouse will receive the deceased’s personal chattels and a statutory legacy of £250,000, as well as half of the balance of the deceased’s estate. Any children will take the other half of the estate on trust in equal shares and if any children predecease leaving children of their own, the grandchildren will take their parent’s share between them. Interest will accrue on a simple basis on the statutory legacy from the date of death. The key change here is that in the old Rules the surviving spouse would receive only a life interest in half of the balance of the estate, after payment of the statutory legacy.
- Under the current Rules the Lord Chancellor has power to set the statutory legacy (mentioned above), but is not under any obligation to do so nor to keep it under review. The new Act provides that the Lord Chancellor may make an order to specify the amount of statutory legacy at any time and he must make an order at least every five years. There are particular provisions detailing the process and limitations on the Lord Chancellor setting the statutory legacy and unless the Chancellor orders otherwise, the statutory legacy should be increased in line with the Consumer Prices Index rounded up to the nearest £1,000.
- The new Rules redefine personal chattels for the purposes of the Intestacy Rules. The definition includes all tangible, moveable property except for property (a) consisting of money or securities for money, (b) used at the death of the intestate solely or mainly for business purposes, or (c) held at the death of the intestate solely as an investment. The key change to the old Rules is that it is only items that are primarily used for business purposes that will be excluded from the definition of personal chattels, whereas the current Rules entirely exclude chattels used for business purposes. The new Rules therefore helpfully widen the definition as it is common for personal items (such as laptops) to overlap into business use. This new definition will apply to all wills which incorporate the statutory definition of personal chattels on or after the date of commencement (1 October 2014), (and likewise, the old definition will apply to all wills which incorporate the statutory definition and are executed before the 2014 Act comes into force), unless contrary intention is shown.
If you would like any further information on these issues please contact one of the Edwin Coe Private Client team.
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